Irwin Mitchell | Focus on Education | Spotlight: On the additional legal responsibilities owed by academy head teachers

Spotlight: On the additional legal responsibilities owed by academy head teachers

Head teachers who are appointed as Directors of their Academy Trust owe important legal duties under the Companies Act 2006 which can easily be overlooked and land them in deep water if breached

Duty to act in the best interests of the academy

Under the Companies Act 2006, directors have a duty to act within the powers granted to them and in the best interests of the academy. Whilst head teachers must be able to demonstrate that they genuinely believe they are acting in the best interests of their school, they must also show that their actions are within the powers conferred on them by the Act. If actions taken are outside of this, they cannot be in the best interests of the academy, no matter how well intentioned the head may be.

Duty to act in good faith

This means that a head must act in a way that is most likely to promote the success of the academy and the children. This means that the head should consider:

  • The likely long term consequences of any decision
  • The interests of the academy staff
  • The need for the academy to foster good relationships with children, parents and other interested parties
  • The impact the academy has on its community and environment;
  • Maintaining a reputation for high standard of conduct and academic achievement
  • The need to act fairly between members of the academy’s trust board.

This duty applies to all decisions made by the head and not just the formal decisions made by the whole board.

A good rule of thumb is that a decision will only be deemed to be in good faith if it is one that a reasonable and intelligent head could have concluded would promote the success of the academy. Head teachers therefore always need to have the best interests of the academy at the forefront of their decisions.

Duty to exercise independent judgment

This requires heads to exercise their own powers independently and exercise independent judgment. The head can delegate some decision-making responsibilities provided these are authorised by the constitution of the academy. If the head obtains professional or other advice, they are still expected to exercise their own judgment before deciding whether or not to follow it.

Duty to exercise care, skill and diligence

A head must demonstrate that they acted in a way that could be expected of a reasonable head teacher (with a similar general level of knowledge, skill and experience). Plus head teachers with specialist knowledge will be expected to demonstrate skills commensurate with their own expertise.

Duty to avoid conflicts of interest

A head teacher must avoid situations in which they have or can have a direct or indirect interest that conflicts with, or may conflict with, the academy’s interests.

Duty not to accept benefits from third parties

Head teachers must not accept any benefit (including a bribe) given to them in an attempt to influence their decision, particularly in circumstances where there is a conflict of interest between what is in the academy’s best interests as opposed to the head’s personal interests.

Duty to declare an interest in a proposed transaction or arrangement with the academy

A head must declare to other board members if they have any interest (direct or indirect) in any arrangement with the academy. This might occur where a family member of the head has applied for a role or a contract, or where the head has a personal financial interest in a company providing services to the academy.

What happens if a head breaches any of these duties?

The academy can bring a civil claim against any head that breaches these duties and, if it has suffered financial losses it could seek to recover these from the head. Plus, if the breach was sufficiently serious, the head can be dismissed with or without notice. Any contract or other arrangement entered into by the head on behalf of the academy in breach of a duty would be void, though it could be open to the academy to ratify the agreement if it wished to do so.

Options open to academies

Some academies will prefer to agree terms where the new head has breached these obligations and set these out in a settlement agreement. The academy can agree not to pursue the head for any claims it may have against them in exchange for the head resigning and going “quietly”. This mechanism can also be used to reinforce or introduce restrictive covenants and protect sensitive information being disclosed to others by the head.

The decision to litigate must be taken by the board and it will have to weigh up the time and cost involved in bringing a civil claim and the likelihood of success and of recovery of damages from the head. It may also wish to avoid adverse publicity that these sorts of cases generate. That said, Irwin Mitchell has had success with pursuing and recovering money for organisations previously and can help you reach the best result for your school.

Key Contact

Jane Anderson